EXHIBIT 2.2
CONFIDENTIAL TREATMENT
SONIC AGREEMENT
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THIS SONIC AGREEMENT (this "Agreement") is made and entered into as of June
30, 1999, by and among (i) SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"Guarantor"), (ii) the signatories listed on Schedule A attached hereto (the
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"Tenants"), and (iii) CAR MMR L.L.C., a Delaware limited liability company (the
"Acquirer"), in connection with that certain Acquisition Agreement dated of even
date herewith (the "Acquisition Agreement") by and among (a) O. Xxxxxx Xxxxx, an
individual, Sonic Financial Corporation, a North Carolina corporation
(collectively, the "Sellers"), MMR Holdings, L.L.C., a North Carolina limited
liability company ("MMR Holdings"), MMR Viking Investment Associates, L.P., a
Texas limited partnership ("MMR Viking"), and MMR Tennessee, L.L.C., a North
Carolina limited liability company ("MMR Tennessee"), and (b) the Acquirer.
RECITALS
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A. Pursuant to the Acquisition Agreement, the Sellers are selling,
transferring, conveying and assigning their membership interests and partnership
interests, as the case may be, and the Acquirer is acquiring such membership
interests and partnership interests, in MMR Holdings, MMR Viking, and MMR
Tennessee (collectively, the "Landlords", and each, a "Landlord"), in exchange
for cash.
B. Upon consummation of the transaction contemplated by the Acquisition
Agreement, the Acquirer will own, directly or indirectly, one hundred percent
(100%) of the ownership interests in the Landlords.
C. Pursuant to certain leases (the "Pre-Acquisition Leases"), the
Landlords have leased to the Tenants the Properties.
D. Pursuant to certain guaranties (the "Pre-Acquisition Guaranties") in
favor of the Landlords, Guarantor has guaranteed the obligations of the Tenants
under each of the Pre-Acquisition Leases.
E. In order to induce the Acquirer to consummate the transaction in
accordance with the Acquisition Agreement and in connection with the obligations
of the parties thereto which include, inter alia, that: (i) the Landlords and
the Tenants of the Properties shall terminate the Pre-Acquisition Leases and
enter into the Sonic Lease (as defined herein); (ii) the Pre-Acquisition
Guaranties shall be terminated and the Guarantor shall execute the Sonic
Guaranties (as defined herein); and (iii) the Acquirer shall commit to purchase
additional automobile dealership properties from Guarantor, the parties have
agreed to set forth certain of their rights and obligations, all as more
particularly set forth hereinbelow.
F. Unless otherwise provided herein, all terms used in this Agreement
that are defined in the Acquisition Agreement shall have the meanings provided
in the Acquisition Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, the parties hereto agree as follows:
1. Tenants.
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(a) Representations and Warranties. The Tenants hereby represent and
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warrant jointly and severally to the Acquirer that the representations and
warranties set forth below are true and correct as of the date first above
written and shall be true and correct in all material respects on and as of the
Closing:
(i) Litigation. Except as shown on Schedule 1(a)(i) attached
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hereto, there is no action, suit, litigation or proceeding pending or, to the
Tenants' knowledge, threatened against any of the Tenants or the Properties that
could reasonably be expected to have a material adverse effect on any of the
Properties or on the ability of any Tenant to execute or deliver, or perform its
obligations under, this Agreement or any of the Sonic Leases (as hereinafter
defined).
(ii) Environmental. The Tenants have no knowledge of any
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violation of Environmental Laws related to the Properties or the presence or
release of Hazardous Materials on or from such Properties, except as reflected
in the environmental reports listed on Schedule 1(a)(ii). Schedule 1(a)(ii) is a
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list of all written environmental reports and results of environmental
inspections and tests in the possession of the Tenants, which list is complete
in all material respects. The Tenants have not used the Properties for the
generation, treatment, storage, handling or disposal of any Hazardous Materials
in violation of any Environmental Laws.
(b) Termination Agreements. Each of the Tenants agrees that it will
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at Closing enter into a Pre-Acquisition Lease Termination Agreement and Estoppel
Certificate in the form attached hereto as Exhibit 1(b).
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(c) Sonic Leases. Each of the Tenants agrees that, with respect to
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each Property subject to a Pre-Acquisition Lease, it will at Closing (or with
respect to a Substitute Property or Contingent Property, Sonic or its Affiliate
will, at the closing of the transaction consummating the acquisition of such
Substitute Property or Contingent Property), enter into a lease in the form
attached hereto as Exhibit 1(c) (each, a "Sonic Lease"); provided, however, (i)
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that the term of each Sonic Lease shall be the unexpired term of the Pre-
Acquisition Lease it is replacing (and the initial term of each Sonic Lease with
respect to the Contingent Property or
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the Substitute Property shall be for a period of ten (10) years), and (ii) the
base rent and escalation thereof under each Sonic Lease shall be as set forth in
Section 4 of the lease attached hereto as Exhibit 1(c).
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2. Guarantor.
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(a) Representations and Warranties. Guarantor hereby represents and
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warrants to the Acquirer that the representations and warranties set forth below
are true and correct as of the date first above written and shall be true and
correct in all material respects on and as of the Closing:
(i) Due Authorization. The execution and delivery of, and
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performance under, this Agreement and the Sonic Guaranties (as hereinafter
defined) has been duly and validly approved by all necessary applicable
corporate action and constitutes (or, with respect to the Sonic Guaranties, upon
execution will constitute) the valid, legally binding, and enforceable agreement
of Guarantor, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and transfer and other similar laws of general
application heretofore or hereafter enacted or in effect, affecting the rights
and remedies of creditors generally.
(ii) Litigation. Except as shown on Schedule 2(a)(ii) attached
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hereto, there is no action, suit, litigation or proceeding pending or, to
Guarantor's knowledge, threatened against the Tenants, Guarantor, or the
Properties that could reasonably be expected to have a material adverse effect
on the financial condition of Guarantor or its ability to execute or deliver, or
perform its obligations under, this Agreement or any of the Sonic Guaranties.
(iii) Financial Statements. The financial statements of
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Guarantor, and the notes related thereto, included in the Form 10K for the
fiscal year ended December 31, 1998, and 10Q for the quarter ended March 31,
1999, present fairly the consolidated financial condition of Guarantor as of the
dates indicated and the results of the operations and changes in consolidated
cash flows for the periods specified; such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and there has occurred no material adverse change in the
financial condition or prospects of Guarantor since the date of such financial
statements.
(b) Sonic Guaranties. Guarantor agrees that, with respect to each
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Sonic Lease, it will at Closing execute a guaranty in the form attached hereto
as Exhibit 2(b) (each, a "Sonic Guaranty").
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(c) Legal Opinion. Guarantor shall cause its counsel to deliver a
legal opinion which may be relied upon by the Acquirer, opining as to the
enforceability of this Agreement, the Sonic Leases and the Sonic Guaranties.
3. Repurchase Option. Subject to the terms and conditions provided in
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this Section 3, Guarantor shall have the right (the "Option to Substitute") from
time to time to purchase one or more of the Properties and to substitute
therefor one or more properties (each, a "Replacement Property").
(a) Guarantor may exercise the Option to Substitute only by
delivering written notice (each, a "Substitution Option Notice") of the exercise
of such right to the Acquirer during the period commencing on the day after the
Closing Date and expiring, with respect to each Property, on the date on which
the initial term of the Sonic Lease for such Property expires or is sooner
terminated (each, a "Substitution Window Expiration Date").
(b) In the event that Guarantor elects to purchase a Property,
Guarantor shall simultaneously sell to the Acquirer a Replacement Property that
has previously been approved in writing by the financial institution (the
"Lender") that has made to the Acquirer or an Affiliate thereof a loan (the
"Loan") secured by the Property in accordance with the qualifications for a
Replacement Property under such Lender's requirements. Each date on which the
transactions contemplated by this Section 3 are consummated with respect to a
Property and a Replacement Property shall be known as a "Substitution Date",
which Substitution Date in all events shall not be later than ninety (90) days
after the date of the applicable Substitution Option Notice. The parties shall
reasonably cooperate to consummate the substitution contemplated by this Section
3 within the aforesaid ninety (90) day period. The value of the Replacement
Property shall be approximately equal to the Purchase Price allocated to the
Property being replaced but in no event less than the Purchase Price allocated
to such Property, and the aggregate value of all Replacement Properties shall
not exceed the aggregate value of such replaced Properties by more than Three
Million Dollars ($3,000,000.00).
(c) On the Substitution Date:
(i) Guarantor shall (A) execute, or cause the Designated Grantee
(as hereinafter defined) to execute, a lease in the form attached hereto as
Exhibit 1(c) for the Replacement Property (provided, however, (I) that the
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initial term of such lease shall be the unexpired initial term of the lease of
the Property being repurchased, plus two five (5) year renewal periods, and (II)
during each year of the term of the lease for the Replacement Property, the base
rent and escalation thereunder shall be not less than the base rent and
escalation under the lease for the applicable Property being repurchased, (B)
execute a guaranty in the form attached hereto as Exhibit 2(b), (C) execute,
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acknowledge, and deliver to the Acquirer a special warranty deed for the
Replacement Property, (D) pay the Allocated
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Property Cost (as hereinafter defined) for such Property in cash or readily
available funds (E) execute, acknowledge and deliver to the Acquirer such other
documents as may reasonably be requested by the Acquirer or the Lender, and (F)
pay to the Acquirer all out-of-pocket costs incurred by the Acquirer in
connection with such purchase of the Replacement Property and sale of the
Property (including, without limitation, costs incurred in connection with title
insurance policies, surveys, zoning reports, appraisals, building condition
surveys, attorneys' fees, deed, mortgage and other recordation, transfer,
document and stamp taxes, and any fees imposed by the Lender in connection with
such substitution); and
(ii) the Acquirer shall (A) execute, acknowledge and deliver to
Guarantor or the Designated Grantee a special warranty deed for the Property,
(B) execute and deliver the lease for the Replacement Property set forth in
Section 3(c)(i)(A) and (C) pay the Replacement Property Purchase Price (as
hereinafter defined) in cash or readily available funds. The Property shall be
conveyed to Guarantor or the Designated Grantee in its "as is" condition as of
the Substitution Date, subject to all restrictions, covenants, declarations, and
easements of record as of such date and subject to the tenancy of the applicable
entity under the applicable Sonic Lease. The Guarantor shall provide to the
Acquirer representations and warranties customary in a sale transaction in
connection with the conveyance of the Replacement Property. The Substitution
Date shall occur, if at all, prior to the earlier of (X) the Substitution Window
Expiration Date, and (Y) the date on which the Loan (as hereinafter defined) is
discharged. "Allocated Property Cost" shall mean the Purchase Price allocated
to the Property being replaced, plus all allocated costs capitalized by the
Acquirer in connection with the Acquirer's acquisition and ownership of such
Property. "Replacement Property Purchase Price" shall mean the fair market
value of the Replacement Property as determined by an appraisal reasonably
acceptable to the Acquirer.
(d) Guarantor's rights under this Section 3 may only be exercised
with respect to Properties, the Allocated Property Cost of which, when
aggregated with the Allocated Property Cost of all Properties that are then
being or have previously been repurchased, does not exceed an amount equal to
Fifty-One Million Four Hundred Seventy-Six Thousand Nine Hundred Two and 75/100
Dollars ($51,476,902.75).
(e) Guarantor's rights under this Section 3 may be exercised by Sonic
Automotive, Inc. only, and may not be exercised by any other Person or entity;
provided, however, that by written notice to the Acquirer within five (5)
Business Days prior to the Substitution Date, Guarantor may elect to have title
to the applicable Property conveyed to any Affiliate of Guarantor (a "Designated
Grantee"). No such election, and no assignment of this Agreement or Guarantor's
rights hereunder, shall discharge Guarantor from its obligations hereunder.
(f) If Guarantor is in default under this Agreement or there exists
an Event of Default under the applicable Sonic Lease on the date the
Substitution Option Notice is given
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or at any time thereafter prior to the Substitution Date, then, at Landlord's
option, the Substitution Option Notice shall be null, void, and of no force or
effect.
(g) Notwithstanding anything to the contrary contained in this
Section 3, Guarantor shall have no option to purchase the Lone Star Nissan
Oldsmobile Property located in Stafford, Texas unless Guarantor simultaneously
purchases the Xxxx Xxxxx Property located in Dallas, Texas in connection with an
Option to Substitute.
4. Future Acquisition Commitment. The parties hereto acknowledge that
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Guarantor will be acquiring additional automobile dealership properties (the
"Additional Properties") from third parties. During the period (the "Future
Acquisition Period") commencing one (1) day after the Closing Date, and ending
on December 31, 1999 (the "Future Acquisition Period Expiration Date"), the
Guarantor may agree to sell and the Acquirer agrees, if requested by the
Guarantor, to purchase, from time to time during the Future Acquisition Period,
such Additional Properties, the purchase price of which shall not exceed
Seventy-Five Million Dollars ($75,000,000) in the aggregate, on the terms and
conditions set forth herein. From time to time during the Future Acquisition
Period, the Guarantor may provide written notice (the "Acquisition Notice") to
the Acquirer of its desire to sell one or more Additional Properties. Within
ten (10) days after the Acquirer's receipt of the Acquisition Notice, the
Guarantor and the Acquirer shall enter into a mutually acceptable purchase
agreement (or mutually acceptable assignment of an existing purchase agreement
between the Guarantor and the seller of the Additional Property) providing,
among other things, (a) that the purchase price for such Additional Property
shall be based on a capitalization rate (the "Cap Rate") equal to the lesser of
(i) *, and (ii) a rate equal to two hundred fifty (250) basis points over the
Acquirer's "all-in cost of long-term fixed debt refinancing" for the acquisition
of the Additional Properties; (b) that such acquisition shall be subject to
customary due diligence by Acquirer (the results of which due diligence shall be
made available to the Guarantor), including, without limitation, review of (i)
the environmental and structural condition of such Additional Property, (ii)
title and survey, and (iii) appraisals/valuation; (c) that the Guarantor pay,
except as otherwise mutually agreed by the parties, all reasonable costs and
expenses of such closing, including, without limitation, the cost of recording
and transfer fees, title insurance, surveys, environmental studies, structural
reports and appraisals and legal and accounting fees, and (d) that the Acquirer
shall enter into a lease with or guaranteed by Guarantor, using a lease in the
form attached hereto as Exhibit 1(c), provided that the annual rent under such
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lease shall be equal to the product of (i) the purchase price, multiplied by
(ii) the Cap Rate.
*Text deleted pursuant to application for Confidential Treatment under
Rule 24b-2 of the Securities Exchange Act of 1934 and filed separately with the
Securities and Exchange Commission.
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5. Postponed Conveyance or Substituting of Properties. Pursuant to the
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Acquisition Agreement, in certain instances in which Owners do not convey all of
the Properties, then until such time as such Property or Substitute Property is
conveyed to the Acquirer or its Affiliate as more particularly set forth in the
Acquisition Agreement, Guarantor shall use best efforts to convey to the
Acquirer or its Affiliate, such Property or such Substitute Property, as
applicable, in accordance with and subject to the terms and conditions of
transferring a Property or Substitute Property under the Acquisition Agreement.
6. Obligation to Renew. During each calendar year in which the Initial
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Term of any Sonic Lease expires, Guarantor shall cause the Tenants of Sonic
Leases expiring in such calendar year not to, and the Tenants of the Sonic
Leases expiring in such calendar year shall not, give notices effecting the
termination of any combination of Sonic Leases during such calendar year, the
aggregate annual Base Rent of which during the last year of the Initial Term
exceeds twenty-five percent (25%) of the aggregate annual Base Rent during the
last year of the Initial Term of all Sonic Leases expiring in such calendar
year.
7. Miscellaneous.
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(a) Survival. The representations and warranties contained in this
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Agreement shall survive the Closing for a period of five (5) years from the
Closing Date (except that representations and warranties relating to any of the
Properties shall survive Closing for a period of one (1) year from the Closing
Date) and shall not be deemed to be merged into or waived by the instruments of
the Closing.
(b) Additional Actions and Documents. Each of the parties hereto
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hereby agrees to use its commercially reasonable efforts to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents, and to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement. The
obligations of the parties set forth in this Section 7(b) shall survive the
Closing and shall not be deemed to be merged into or waived by any instrument of
conveyance delivered at Closing.
(c) Entire Agreement; Amendment. This Agreement, including the
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exhibits, schedules and other documents referred to herein or therein or
furnished pursuant hereto or thereto, constitutes the entire agreement among the
parties hereto with respect to the transactions contemplated herein, and
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed and delivered by the party against whom enforcement of
the amendment, modification or discharge is sought.
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(d) Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Faxed signatures shall have the same
binding effect as original signatures.
(e) Governing Law. This Agreement, the rights and obligations of the
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parties hereto, and any claim or disputes relating thereto, shall be governed by
and construed in accordance with the laws of the State of North Carolina
(excluding the choice of law rules thereof) except for actions affecting title
to real property, in which case the laws of the state in which the real property
is located shall apply.
(f) No Third Party Beneficiaries. This Agreement is solely for the
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benefit of the parties hereto and the Acquirer, and no provision of this
Agreement shall be deemed to confer any benefit on any third party other than
the Acquirer.
(g) Severability. If any provision of this Agreement shall be held
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invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
(h) Binding Effect. This Agreement shall inure to the benefit of and
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be binding upon the parties hereto and their respective successors and assigns.
(i) Headings. The headings contained in this Agreement are for
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reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
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THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ACQUISITION
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE PROVISIONS
OF THIS SECTION 7(j) SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
(k) Assignment. The Acquirer may assign its rights and/or obligations
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under this Agreement to any Affiliate.
(l) Confidentiality. Guarantor and Tenants agree to keep confidential
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the Cap Rate as defined in the Acquisition Agreement and in this Agreement, and
shall not disclose the Cap Rate to any Person.
(m) Wire Transfer. Guarantor agrees that it shall use best efforts to
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cause the payment of all Rent under the Sonic Leases to be made by one wire
transfer on a monthly basis.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GUARANTOR:
SONIC AUTOMOTIVE, INC.,
a Delaware corporation
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
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Title: Vice President and Chief Financial
Officer
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ACQUIRER:
CAR MMR L.L.C., a Delaware limited liability
company
By: Capital Automotive L.P., a Delaware
limited partnership,
its Managing Member
By: Capital Automotive REIT,
a Maryland real estate
investment trust,
its General Partner
By: /s/ Xxxxx X. Xxx
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Name: Xxxxx X. Xxx
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Title: Vice President and
Chief Financial
Officer
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TENANTS:
[See Attached Schedule A]
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EXHIBIT 2.2
CONFIDENTIAL TREATMENT
LIST OF SCHEDULES AND EXHIBITS
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*Schedule A Signature Blocks for Tenants
*Schedule 1(a)(i) Litigation
*Schedule 1(a)(ii) Environmental Reports
*Schedule 2(a)(ii) Litigation (Guarantor)
*Exhibit 1(b) Form of Pre-Acquisition Lease Termination
Agreement and Estoppel Certificate
*Exhibit 1(c) Form of Lease Agreement
*Exhibit 2(b) Form of Lease Guaranty
*Omitted. The Registrant agrees to furnish supplementally to the Commission a
copy of any omitted exhibit or schedule upon request.
